The US stock market is one of the world’s oldest and largest stock markets. It has more than 6,000 domestic and international companies listed on its stock exchanges. The US stock market hosts some of the biggest global names across all sectors. The types of companies listed on the US stock exchanges are mega-cap, large-cap, mid-cap and small-cap.
Mega cap stocks are the largest companies with a market cap above USD 200 billion. Large-cap companies are stocks with a market cap of more than USD 10 billion. Mid-cap stocks belong to companies with a market cap in the range of USD 2 billion to USD 10 billion. While small-cap stocks belong to companies with a market cap between USD 300 million and USD 2 billion.
Who Should Invest in US Stocks?
Investors seeking international exposure should consider investing in US stocks. Diversifying internationally will help the investment portfolio in generating significant returns. Investing in US stocks will help you benefit from dollar appreciation as well.
However, you need to closely track the US economy and the markets. Furthermore, investing in US stocks has its own risks. The inherent volatility in the markets and also the forex risks are inevitable while investing internationally.
How to Invest in the Best US Stocks?
The US stock markets used to be out of reach for Indian investors. But now, things are different. There are many ways to invest in US stocks from India. You can invest in best US stocks right now in the following two ways:
Direct investments: Own the stocks of US companies directly by opening an overseas trading account with a domestic broker or overseas trading account with a foreign broker
Indirect investments: Put your money in mutual funds or ETFs that invest in the US market.
Benefits of Investing in US Stocks
Following are the benefits of investing in best US stocks now:
Access to Global Companies
US companies host the biggest tech companies and globally recognized brands. The US stock market also has companies from China, Germany, Japan, etc. listed on its exchanges. These companies are well-known all over the world. Because the US is a global power, its stock market is worth investing in.
Diversification
Through US stock, you can spread out and diversify your investments in the US economy to reduce economic risks. A country’s stock market is affected by political issues, elections, the budget, etc. Diversifying your money is a good way to protect your investments from a sudden impact. Even though gold and bonds are good investments, putting money into US stocks is a good way to diversify your portfolio. Also, it may have the potential to set you up for good returns.
Fractional Investing
You can do fractional investing in the US markets. To elaborate, 1 share of Apple is about USD 163, i.e., approximately INR 13,000. It may seem quite expensive to invest in the US stock market. However, Indians can invest in fractions. You can buy Apple shares in fractions for INR 2,000 or INR 5,000, as it may seem fit for you. Thus, investing in US stocks is for everyone who wishes to diversify their investments geographically.
Benefit From Dollar Appreciation
When you buy US stocks as an investment, you pay for them in dollars. While buying US stocks, you are betting not only on the stock’s value but also on the dollar. If the dollar goes up against the rupee, your investment goes up, too.
Being Part of the US Growth Story
The US is home to some of the biggest tech giants. Innovation comes every day. New companies, technologies, and products emerge from time to time. Having access to participate in the growth story of such companies and the economy will help you generate significant returns.
Things to Consider Before Investing in Best US Stocks
The following are the things to consider before investing in the top US stocks:
Financial knowledge and expertise: You should know how the US market and global investing work. You should invest only if you have the time and knowledge to study the market.
Cost of investment: Investing in the US market is more expensive than in the Indian market. You must pay bank charges, brokerage fees, and taxes on your investment.
Exchange rates: You face exchange rate risk when investing in foreign markets. This can have an adverse impact when you invest or withdraw your money.
Taxation of gains and dividends: You must pay taxes on your gains and dividends from US stocks. The dividends are taxed at 25%, and the long-term gains (holding period more than 24 months) are taxed at 20% in India. But they are not taxed in the US. The short-term gains (holding period less than 24 months) are taxed as per your income tax rate in India. If the US company deducts tax at source, you can claim it back when you file tax in India. This is because India has a DTAA agreement with the US and 88 other countries to avoid double taxation.
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Mutual Fund investments are subject to market risks. Please read all scheme related documents carefully before investing. Past performance is not an indicator of future returns.
The MSCI World index has the US at 69% of the total value of global stock market. This fluctuates a small amount over time but is consistently in the same area. With this being the case, many experts argue that all investors should have at least some money in US stocks, the only real question is how much.
Alongside Microsoft Corporation (NASDAQ:MSFT), NVIDIA Corporation (NASDAQ:NVDA), and Apple Inc. (NASDAQ:AAPL), Adobe Inc. (NASDAQ:ADBE) is one of the best money making stocks to invest in. In its Q3 2023 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Adobe Inc.
1. Nvidia (NVDA) Nvidia is one of the best performing stocks of all-time and has richly rewarded shareholders over the past decade. Nvidia initially rose to prominence for its chips used for video-game graphics, but its business has boomed recently thanks to the rise of artificial intelligence.
Dubbed the Magnificent Seven stocks, Apple, Microsoft, Google parent Alphabet, Amazon, Nvidia, Meta Platforms and Tesla lived up to their name in 2023 with big gains. But the early part of the second quarter of 2024 showed a big divergence of returns.
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